Bad Debt and Doubtful Provision (Week 9) Flashcards
1
Q
Bad Debt
A
Debt that will not be paid
Dr Bad Debt Expense (IS)
Cr Trade Receivables (SoFP)
2
Q
Doubtful Debt
A
Additional adjustment (provision) against debts that may not be paid (based on past experience or industry averages)
3
Q
How to calculate new Trade Receivable amount
A
Multiplying the net receivables balance after discounts offered and specific bad debts have been deducted.
4
Q
Maintaining Provision
A
Compare new provision to old one
inc in provision –> inc expense (IS) + dec trade receivable (SoFP)
dec in provision –> inc revenue (IS)
+ inc trade receivable (SoFP)
